Mortgage Business

Let’s Add Up The Data

20140309-080351.jpgWe very rarely get a week of economic data like the past week. We had a week of employment releases, culminating in the release of the employment report on Friday. We also had the Federal Reserve’s Open Market Committee meeting last week. Add to that the release of personal income and spending data for June and for good measure add in the first estimate of the second quarter growth of the economy (GDP). It is tough to sum up all that data in a short amount of time and indeed it may take some time for the markets to fully absorb the data as well. But let’s give it a shot by asking the general question — how did we do?

With regard to second quarter growth, the preliminary number released on Wednesday was strong. However, the 4.0% growth rate is subject to revision and it comes after a drop of 2.1 % in the first quarter due to the harsh winter we experienced. Taken together, the economy grew at less than a 1.0% rate during the first half of the year and economists expect faster growth during the second half, but not necessarily as strong as 4.0%. Meanwhile, the Fed’s statement after their meeting contained no surprises as they continue to lessen stimulus by paring down on purchases of securities and were a bit more upbeat in their assessment of the economy which gave the markets the idea that a rate increase will still come down the road, but that “down the road” is probably closer than it has been.

The big release was supposed to be the jobs report on Friday. Actually the numbers released were fairly tame. The 209,000 jobs created were close to expectations, but did not exceed expectations. Even the increase in the unemployment rate from 6.1% to 6.2% was not seen as bad news because more Americans were participating in the labor market which is a key component of confidence. The tame numbers served to calm the markets which fell precipitously on Thursday because of fears that if the positive GDP report was coupled with strong jobs growth, the Fed could raise rates even sooner than expected.


The Markets. As in the past month, rates continued to be stable last week. However, the data released did not reflect the full reaction to the Fed meeting and the release of the jobs report on Friday. Freddie Mac announced that for the week ending July 31, 30-year fixed rates fell slight to 4.12% from 4.13% the week before. The average for 15-year loans ticked down to 3.23%. Adjustables were also stable in the past week with the average for one-year adjustables down slightly to 2.38% and five-year adjustables increasing marginally to 3.01%. A year ago 30-year fixed rates were at 4.39%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac –“Rates were little changed for the week with the 30-year fixed-rate mortgage rate at 4.12 percent, just a basis point lower from the previous week. Meanwhile, on Wednesday afternoon the yield on the 10-year Treasury surged as data showed gross domestic product for the second quarter at a 4.0 percent annualized rate, above expectations.”  Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated August 1, 2014

Daily Value Monthly Value
July 31 June
6-month Treasury Security 0.05%  0.06%
1-year Treasury Security 0.12%  0.10%
3-year Treasury Security 1.02%  0.90%
5-year Treasury Security 1.76%  1.68%
10-year Treasury Security 2.58%  2.60%
12-month LIBOR  0.542% (June)
12-month MTA  0.118% (June)
11th District Cost of Funds  0.667% (May)
Prime Rate  3.25%

  Young people are starting to leave their parent’s home and move out on their own. The Current Population Survey for 2013 showed a drop in the percentage of 20-somethings living with parents, marking the first decline since 2005. As of now, the percentage drop appears minimal: Those aged 18 to 24 living with parents or a related subgroup dropped from 56 percent to 55 percent in one year. However, Brad Hunter, chief economist at Metrostudy, notes in a Builder online article that the one-percentage-point decline represents 300,000 people who were previously living with their parents that are now looking for a household of their own. Indeed, a recent report by Harvard University’s Joint Center for Housing Studies predicts that 2.7 million more households will form among people in their 30s over the next decade. First-time buyers usually make up about 40 percent of home buyers. However, lately, the share has been in the 35 percent to 38 percent range, Hunter says. The delay in millennials branching out on their own has greatly reduced household formation in recent years. Household formation rates usually average 1.4 million per year. Lately, the rate has been about 500,000 to 700,000 a year. “We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place,” Hunter notes. “While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.” Source: Builder 

The average monthly rent for an apartment increased in the most recent quarter to $1,099, up 0.8 percent from the first quarter of this year and up 3.4 percent year over year, according to Reis Inc., a real estate research firm. It marked the 18th consecutive quarter for rent increases at a time when income growth has mostly been stagnant. All 79 U.S. metro areas that Reis tracks saw an increase in effective rents, with coastal cities posting some of the highest rent growth in the past year. For example, rents rose more than 6 percent in the past year in San Francisco, San Jose, and Seattle, according to Reis. Other metros not usually associated with high rent increases also saw a rise, such as Charleston, S.C., and Nashville, Tenn., where each saw rents increase about 5 percent or more in the past year. “You have definitely seen that recovery now spread to all of the major markets around the country, even if some of them were laggards,” Ryan Severino, an economist at Reis, told The Wall Street Journal. While rents have been rising, household incomes have mostly been stagnant. The median household income in 2012 was $50,017, compared to the 2007 peak of $55,627, according to U.S. Census data. Some relief may be in sight for renters soon. Apartment vacancies in the second quarter were unchanged nationwide at 4.1 percent, which could signal that supply is starting to catch up with demand. The market is expected to add 180,000 multifamily units this year, according to Reis. Source: The Wall Street Journal

A new study initiated by Smart Growth America says that creating dense, walkable developments gives cities a fatter wallet. In Washington, D.C., cited as the most walkable U.S. city, the most walkable parts take up less than one percent of the area but contain almost half of the city’s top wealth-generating square footage. Smart Growth America says that while urban areas can contain drivable communities and outer areas can encourage walking, a community with good walkability will still feature “high density, a mix of real estate uses, multiple transportation options, and the ability to serve the daily needs of residents largely on foot,” according to writer Alissa Walker. Source: 

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